02/15/2017 3:46 PM |
Anonymous

By: Catherine Siebel, Impact Assessment for
Foundations and Nonprofits
I have been intending to write this post for several months. But today was the day that I put my resolve to the sticking place (forgive the messy metaphor) and decided to sit down to my computer. Today, you see, was the day that I received the following e-mail:

Hi Catherine,

Our budget is tighter than we thought and there doesn’t seem to be extra room for us to have you to work on our program assessment. Thanks very much for your time and your proposal.

This e-mail followed two phone calls about the scope of the project, an hour of my time going through the organization’s materials in order to give them a fair estimate of what I thought the work would take (For the record: the price I quoted was $3,500), and half an hour putting together a brief proposal. This is hardly a novel occurrence – every consultant I know has experienced some variation of this.

I see this situation – and countless others just like it – as a consequence of three factors that anyone in the sector who has either engaged a consultant or provided consulting services recognizes:

Looking for a Deal. Every nonprofit consultant I speak with has several versions of this story: being contacted by a nonprofit about our pro bono services; being asked to shave a few thousand dollars off of a project estimate for budgetary purposes; having a client engage in the practice of “scope/creep”, in which the work requests creep beyond the boundaries of the contracted services; or any number of other scenarios. No matter what you call it, the result is the same: devaluing the work of the people who have the experience and knowledge to strengthen your organization

Misunderstanding Consultant Fees. In my experience, that math that clients tend to do regarding my fees is to compare it to staff salaries (i.e., “This consultant is charging $20,000, which is half what Mary makes!”). This type of calculation leaves out a number of factors that independent contractors must take into account. Remember for example, that this $20,000 must account for compensating ourselves as employees (both sides of income tax; time of for sick days, vacation, etc.; health care and retirement benefits) as well as the cost of running a business (purchasing our own laptop and printer; marketing our services by maintaining a website, engaging in social media, and attending networking events; providing printed materials to our clients). And so – for that $3,500 that I’m charging, about $700 of that is realistically going into my paycheck.

Playing Chicken. I suspect that anyone who is reading this has been engaged in at least one game of chicken between nonprofits and consultants: the nonprofits don’t want to disclose their budget for a given project fear that the consultant’s fees will magically meet that exact number, and consultants don’t want to disclose their fees until they understand the scope of the project, the nature of the organization, and who their competition is. And so begins a time-consuming and arduous process between the two parties where they attempt to feel one another out. Hardly a free market scenario.

Here's what both nonprofits and consultants can do to avoid these problems:

Be Upfront and Transparent (That’s it).

How could the scenario that began this post have been avoided? Both the prospective client and I should have told it like it is. Imagine a world in which the initial contact that the client made read something along the lines of:

“Hi Catherine, We are looking for an evaluator to do (x). The budget we’re looking at is about $1,500. Please let me know about your availability to discuss this project.”

And I could have responded:

“Hello, Thank you for your inquiry. My projects typically begin in the $3,000-$5,000 range; my fee includes the work product as well as all meetings, correspondence and local transportation. Please let me know if you are interested in continuing the conversation.”

Instead, we wasted precious time (and therefore, money) engaged in a ineffective dance that ended in frustration (certainly mine, but also probably the nonprofit’s) - and got none of the work done.

I implore you to think about this. And then change the conversation – quite literally. Save everyone the time, money and frustration.

12/13/2016 11:07 AM |
Anonymous

By: Debbie McCann, W4Sight LLC
One of the services that ACN offers to nonprofits is distributing notifications of Requests for Proposals (RFPs) to its members. Through ACN’s process of distributing RFPs, W4Sight has both successfully secured new business and gained some insight about the RFP process. Last week’s post focused on advice for consultants on going through the RFP process. Today, we’re addressing some advice to nonprofit organizations, from a consultant’s perspective.

Why submit an RFP?

An RFP describes a specific project for which an organization would like to hire a consultant, and provides a set of instructions for preparing a bid. Organizations use RFPs – rather than simply interviewing several consultants gathered from recommendations of friends or colleagues – to provide additional formality to the process and to avoid favoritism or lack of competition. Some funders, particularly public funders, require a competitive process designed to foster a broad range of choices for the agency. Organizations compare RFP responses on price, qualifications, and the proposed approach to the project. Most funders do not require an organization to select the lowest bidder when the RFP is for consulting services.

While going to the trouble to put together an RFP and select a respondent does take time, it also has some advantages:

The process of putting together the RFP forces your organization to establish internal consensus about the project before engaging a consultant

The RFP allows you to attract a wider range of potential respondents than you may have personal connections with.

Why use ACN?

As a professional association of career consultants, ACN distributes your RFP to a core group of high-quality, reasonably-priced practitioners with a wide array of experience and – just as importantly – a professional network of potential colleagues. For projects of larger scope, ACN members can connect with one another to develop a proposal that meets an organization’s needs: according to the most recent member survey, 19% of ACN members have collaborated with one another on projects in the last year. Essentially, submitting an RFP through ACN is the fastest way an organization can get their project in front of a variety of specialists.

What goes in an RFP?

Know what you want. Recently, a colleague of ours encountered an organization that distributed four versions of a single RFP in three months’ time, each with a slightly different scope and project description. This is a red flag – if your staff and leadership aren’t comfortable with an RFP going out, then it needs to be revised internally until they are.

Be clear. In our experience, many organizations have little experience in preparing RFPs, and their initial project description may not be a clear description of what they are really looking for. For example, many projects include the term “strategic planning” to describe anything from a board-level strategic plan to chart the future of the organization to a more tactical plan for executing existing organizational priorities or initiatives.

Be specific. If your RFP is only 2-3 pages, it’s a good bet that consultants will have a lot of unanswered questions about the project. If your work plan depends on conducting interviews, for instance, but it’s not clear how many interviews the consultant will need to conduct, it will be difficult for them to provide you with an accurate price. In order to help consultants prepare an accurate work plan and pricing, provide the detail they need. An organizational chart and explanation of which parts of the organization are affected by the project is extremely helpful. Also, be as specific as you can about the timeline you are expecting and any special constraints that will affect the project – such as a special event that will be a major factor for staff time for the 2 months prior and 2 weeks after the event.

Set a budget. In our experience, pricing in RFPs is sometimes like a game of “chicken” – no one wants to set the price first. Organizations worry that consultants will develop a project plan that uses the entire budget, while consultants are leery of doing the work of putting together a proposal until they know that an organization has budgeted an adequate amount. But by being explicit about their budget, organizations will attract the most qualified candidates who can do the work and stay within your budget. If a proposal comes through that seems as if the consultant is “padding” the scope of work to meet the budget – it’s easy enough to put their proposal in the “no” pile!

Be open and fair. Independent consultants may not have graphic designers to polish their proposals – but that doesn’t mean that the quality of the work is any different. Stay focused on the substance of the expertise you are looking for. Also, remember that independent consultants don’t get paid for writing proposals, so please be mindful of the time you are asking them to put in. There are occasionally situations where the client asks for so many revisions to the proposal that they are essentially looking for a good portion of the project work to be done as part of the selection process. This is an unfair expectation, and can make for a difficult start to a relationship.

12/13/2016 11:05 AM |
Anonymous

By: Debbie McCann, W4Sight LLC
One of the benefits of ACN membership is receiving notifications of Requests for Proposals (RFPs). Through ACN’s process of distributing RFPs, W4Sight has both successfully secured new business and gained some insight about the RFP process. We’ve written two posts about the process from a consultant’s viewpoint – this post focuses on our fellow consultants. Next week we’ll follow up with a post geared toward nonprofit organizations.

Every time we receive an email from ACN announcing an RFP, I take a quick look. If the project description that appears in the ACN “cover email” piques my interest, I take the time to read the entire document as soon as possible. The first thing I look for is whether the services needed are in our area of expertise. Many are not, but it’s important to read carefully. Here are a few tips we’ve learned:

Be mindful of timing: RFPs coming through the ACN pipeline may have been released a week or two earlier, leaving a tight deadline to respond. If you are receive the RFP only a few days or a week before the deadline, some organizations are willing to grant you an extension if you are a qualified respondent. However, you do need to contact them immediately to explain the circumstances and let them know when you can submit a proposal.

Timing is also important because organizations with larger projects also sometimes hold a bidders’ conference, and the date and time are listed in the RFP. It’s important to check right away so that you don’t miss the opportunity to attend. Some bidders’ conferences are mandatory if you plan to respond to the RFP, while others are optional. If you plan to respond to an RFP and there is a bidders’ conference, it’s a good idea to attend. The organization walks through the project expectations in some detail, and explains the response format required along with any other special requirements. If you think you may need to partner with another consultant to provide the whole range of services needed, leverage ACN’s network to find collaborators.

Decide if it’s worth responding: Many consultants avoid RFPs because of the time commitment and/or the inherent risk involved. Consultants often believe that they have a much better chance at securing a contract when they have had a chance to cultivate a potential client and get to know their organization.

However, unless you have reason to believe that the open bidding process is just a sham, it may be worth your time if the project is a good fit for your skills. A few factors to consider before deciding to pursue an RFP:

Are the services requested comfortably within your area of expertise? If it’s a stretch, be careful about spending time writing a proposal for a project you’re not really a good fit for.

Does the RFP provide enough detail to put together a solid proposal?
– If it’s vague (a good bet if it’s only 2 or 3 pages), reach out to the primary contact to ask some key questions.
– If the RFP clearly says “no emails/calls”, then don’t harass them. However, make sure that the assumptions you make about your approach that impact your budget and timeline are clearly documented. Make sure you indicate that changes to these assumptions may require an adjustment to the budget/timeline.

Does the project have strategic value?
One of the benefits of responding to an RFP is that it gets you in front of an organization that you might otherwise not have encountered or had a reason to contact. Ask yourself if the organization or project could add strategic value to your practice – either because of the potential network it presents, or because the project would provide you with a key type of reference you don’t already have in your portfolio.

Develop a Solid Proposal: Of course, no RFP is perfect, so consultants need to find creative ways to create useful proposals. For example, we won one project from a client, despite the fact that the organization was unresponsive when we attempted to ask questions prior to the deadline. Because the project was substantial, and an excellent fit with our expertise, we went ahead with the proposal – though with many documented assumptions. Even though some of our assumptions turned out to be incorrect, the clearly documented work plan was enough to convince them that they should meet with us. We were able to collaborate on the revised scope and come up with a more appropriate statement of work after meeting with the organization. In the end, it was a successful project, and an important credential that we could reference later.

If the RFP contains detailed instructions about the response format they want, then follow what they’ve asked for. However, if they don’t, here’s a suggested outline:
Project Understanding – summarize what you think you understand from the proposal, in your own words.

Approach – provide a detailed project plan in narrative form. For each step or phase of the project, clearly indicate what the major tasks are, what resources the client is expected to provide (type of staff and approximate time commitment), and expected deliverables.

Assumptions – as you are writing up the approach, pay close attention to how you are formulating your work plan. For instance, if the project is to help the client develop a stronger board, and one of your tasks is to identify candidates, make sure you are clear about how many screening calls you are prepared to have, how many interviews you are prepared to do etc. The actual numbers can be updated later, but it’s important for the client to know what your pricing is based on. Another example might be the responsibility for generating materials for a training. You might want to indicate that you will prepare the materials and provide them to the client in electronic form, but making paper copies is their responsibility.

Pricing – provide a summarized version of your pricing that follows your work plan. If your project approach is in three phases, explain what each phase will cost. Be clear if you are providing a fixed price for the whole scope (assumptions are critical for these projects), or if your pricing is on a time and materials basis at an hourly rate.

Qualifications – describe your previous experience that’s relevant to the project. Detailed resumes may not be necessary, but the client should definitely get a clear understanding of why they should choose you over others.

12/13/2016 12:09 AM |
Anonymous

By: Denise DeBelle, Law Office of Denise M. DeBelle
In the last blog, I described certain traps for the unwary non-profit organization if you are politically active and want to avoid risking your 501(c)(3) tax exempt status. Staying non-partisan is key for any 501(c)(3) organization. What about lobbying public officials- can non-profits do that?

Most definitely yes. But because of the risks of violating specific rules of the IRS, some non-profit organizations get nervous about any lobbying at all. This is unfortunate because non-profit organizations have day to day experience with populations needing government assistance, and in-depth knowledge of issues of public importance. The input of non-profits concerning the action of government and the content of our laws, is sorely needed!

What should a non-profit know about lobbying?

First, IRS regulations do not prohibit lobbying by a 501(c)(3).
But second: the IRS does impose limits on the percentage of an organization’s budget that can be devoted to lobbying.

This post will lay out the general rules about lobbying for the 501(c)(3) organization: how IRS defines it, how much is permissible, and how to be able to do more of it and still preserve the tax exempt status of your organization.

Not all advocacy is lobbying. Educating the public, being an expert on a given public issue, or advocating for the enforcement of existing laws, are not, standing alone, lobbying as defined by the IRS.

What are the different types of lobbying?

There are two types of lobbying:

Direct lobbying

Grassroots lobbying, which is a “call to action” by your organization, in which you communicate to members or the general public to urge them to contact legislators with a specific view on legislation, and you provide them with a mechanism for this contact.

Why is it important to know when your organization is lobbying? Returning to our original point, the IRS limits the amount of lobbying if you are a 501(c)(3) – so you are required to keep track of the percentage of your budget in order to not exceed those limits.

There are two ways to compute limits on lobbying applicable to your organization.
The first is the old-fashioned test – an IRS Rule since 1934 – which says that lobbying must be an “insubstantial part” of the organization’s activity. You’re probably asking yourself, What is insubstantial? As you can imagine, this is hard to define. It typically would be stated as roughly 20%, but this is not a true benchmark. Please note that churches and religious non-profits must use this test when lobbying, as they do not qualify for the second rule.

Luckily, Congress enacted a different rule in order to allow more flexibility to 501(c)(3)s. This second test is called the 501(h) election or the 501(h) expenditure test. It is a simple matter to elect this approach. You must submit IRS Form 5768 (a short form which simply requires a signature of the organization’s officer). What it means is the lobbying your organization does must not exceed the applicable percentage of your budget depending upon the level of overall expenditures.

Under the 501(h) expenditure test, the organization may spend the following:

On Direct Lobbying
20% of the first $500,000 of its exempt purpose expenditures
15% of the next $500,000, and so on, up to one million dollars a year

On Grassroots Lobbying
5% of the first $500,000 of its exempt purpose expenditures
3.75% of the next $500,000, and so on, up to $250,000 a year

For non-religious 501(c)(3) organizations, the 501(h) election is definitely worth your consideration. It allows the voices of your constituents, your Board and staff to be heard and to influence the legislators and public officials deciding issues which affect those constituents.

Some of these rules can get very specific and detailed, and there are some other ways to increase your activism but still avoid falling into the lobbying definition. So it is best to consult an attorney in this area if you have more specific questions.

This posting is for information purposes only and is not intended as specific legal advice.

12/13/2016 12:04 AM |
Anonymous

By: Denise DeBelle, Law Office of Denise M. DeBelle
Can you correctly answer these three questions about how the IRS views your organization’s – or your client’s – political activity?

1. TRUE/FALSE: While it is not okay for my organization to directly endorse a candidate on their website, it is okay for us to link to a site of an organization that does.
2. TRUE/FALSE: For our upcoming fundraiser, we can invite one political candidate to speak about issues of interest, as long as they do not speak about the upcoming election campaign.
3. TRUE/FALSE: We can legally distribute a voter’s guide intending to educate our members, clients, and the general public on issues relevant to our organization, as long as the Guide makes comparisons between the candidates’ positions and that of the organization.

Surprise! The answer to all three of these is FALSE. We’ll explore legal options to these issues at the end of this post.

At its most basic, the IRS prohibits any partisan political activity by a non-profit organization, its staff, Board or volunteers when acting in the capacity of the organization. Do you or your non-profit clients get political? If so, you should know something about the relevant IRS rules.

A non-profit organization incorporated under Section 501(c) 3 is organized primarily as a “charity.” This designation distinguishes this type of organization from other non-profits, entitling donors to these organizations to receive a tax deduction. Political activity is outside of the charitable function of the organization.

So any level of political activity, whether federal, state or local electioneering, is never OK.

What counts as political activity? Organizations should ask themselves: Do we lobby elected officials? Have we ever invited candidates to a forum around election time? Have we taken folks to Springfield or Washington D.C. to meet with legislators?

If the answer to any of these is yes, then the following rules are the basics you must know in order to avoid risking tax penalty or loss of tax exemption:
1. Do make your views known to legislators and candidates, but
2. Do not show favoritism to any candidate for election, or in any way participate or cooperate with any organization which endorses a candidate for public office.

This blog post addresses #2. In a subsequent post, I will discuss #1.

Let’s go back to the TRUE/FALSE questions from the beginning of the post. What is the problem with these practices? Let us modify the above examples to show what the organization can do differently.

1. When discussing issues of public concern on your website, simply do not make a reference to any particular candidate in an upcoming election.

2. It is perfectly permissible to host election or candidate forums. But the organization must invite all candidates for that particular office, and give each candidate equal access to your audience.

3. Voter Guides can discuss the issues in detail even if an election is looming. The key for your Voter Guide is to be sure not to describe the voting patterns of candidates in a way to suggest endorsement or approval of any particular candidate.

But wait: does this mean a 501c3 cannot take positions on issues which may imply criticism of an officeholder, during the height of an election campaign? No! A 501c3 organization, including religious organizations, may lobby to influence legislation and that lobbying need not stop merely because an election is going on.

The next article will explore the rules for lobbying, and how non-profits can “elect” to permit more lobbying.

This is general information and is not intended as legal advice. For more detailed guidance as to your organizations’ practices, an attorney should be consulted.

12/12/2016 8:05 AM |
Anonymous

By: Diane C. Decker, Quality Transitions
We’ve all been in meetings that are productive, useful, and just the right amount of time. We have also all been in meetings that are, well, the opposite of those things. While meetings obviously help us get work done, they aren’t always efficient – it’s been estimated that 70% of the time spent in meetings is wasted. Meetings are here to stay – so it makes sense to use these five practical and easy strategies for meeting participants and leaders to increase meeting productivity.

1. Prepare, Implement, and Follow-up
Oftentimes, people devote the five minutes before a meeting to prepare by skimming the agenda or jotting down a few notes. This limited focus – rather than doing the work necessary before and after the meeting – can result in wasted time for everyone in the meeting.

Prepare. Before the meeting, determine its purpose, outputs, and participants. From the purpose, create a detailed timed agenda and send it with pre-work. Providing pre-work increases the quality and creativity of the meeting’s output because more thought has gone into it. Anticipate and plan for issues that may arise during the meeting.

Implement. At the start of the meeting confirm who will lead the group through the agenda and who will take notes. These roles can be rotated, to help build skills and ownership in the meeting. During the meeting, keep the agenda in front of people. Start the meeting with a review of any decisions and follow-up from the previous meeting. Use a set format for meeting notes. Avoid lengthy notes by documenting: 1) key decisions made 2) next steps and those responsible for implementation 3) information to be shared beyond the meeting and 4) pre-work for the next meeting.

Follow Up. Before leaving, evaluate the meeting and confirm decisions that were made, next steps, and owners of each of the action items. For groups with meeting guidelines, discuss which guideline was strong and which one needs to be improved. If you don’t have guidelines, then share what went well and what needs to be improved in future meetings.

After the meeting, distribute the notes for review. Everyone prepares for the next meeting and those with assigned tasks complete them.
2. Create a Realistic Agenda
Putting together an agenda is like cooking-we need to have the right ingredients and add the proper amounts in the correct order. From the meeting purpose, identify specific agenda items and put them in a logical order. Determine who owns each agenda item, which includes leading the discussion, and make sure they know what is expected. Finally, determine the amount of time for each item, working with the discussion leaders.

3. Stay on Track
For regularly scheduled meetings, establish meeting guidelines and keep them within view. The guidelines are a code of conduct developed by the group. Each person agrees to follow the guidelines, and say something when they aren’t being met. Example guidelines include:

Focus on moving forward, rather than overworking an issue
If you have a concern with a decision, say so in the meeting with everyone present
Strive for balanced participation
Another tool for staying on track is the use of a “parking lot” or “issues list.” Whenever anyone brings up an idea or issue that is not on the agenda, it is written in a place that everyone can see. At the end of the meeting, it is determined who will own follow-up on each item. Some items may no longer be relevant by the end of the meeting while others become agenda items for a future meeting.

4. Shorten Meeting Time
The use of the huddle format can shorten meetings. No one sits during these 5-20 minute meetings, which increases the sense of urgency and productivity. Huddles are ideal for information sharing and less complex decision making.

A common cause of wasted time is starting meetings late. Recently I attended a meeting that started more than 15 minutes late primarily because the meeting leader rushed in late and disorganized. She then decided to wait “a few more minutes” for others. If you are the meeting leader, whenever possible start a meeting on time even when there are people missing. Doing so motivates latecomers to come on time in the future so not to miss any part of the meeting.

5. Next Steps
If you are motivated to improve a meeting you regularly lead, send this blog to the meeting participants and suggest you take 10-15 minutes at the next meeting to agree on one step you will take as a group to cut the amount of time wasted in future meetings. If you are not the leader, send the blog to that person and express your interest in helping to improve the meetings further. For tips to address the unique challenges of virtual meetings: Four Ways to Vitalize Your Virtual Team

Learn more about Diane Decker on her ACN Member Profile and her website.

12/12/2016 12:02 AM |
Anonymous

By: Laurel O’Sullivan, The Advocacy Collaborative, LLC.

Who does it better?
Consider two immigration-focused nonprofit organizations: “Nonprofit A” devotes their programmatic efforts to serving individuals on a case-by-case basis, helping them as they wade through the ocean of paperwork and red tape. The second organization, “Nonprofit B”, provides similar support, but also devotes a significant portion of their energy to advocating for policy changes that lighten the burden for immigrants trying to gain citizenship. Which organization helps more people?

Too often, the nonprofit sector either undervalues – or worse, avoids altogether – the power of advocacy. Time and again, nonprofits expect a CEO or other staff person to “do advocacy” in their spare time, relegating it as separate from the rest of the organization. This separatist approach – defining advocacy as an “add on” that continually falls to the bottom of the list – represents a significant missed opportunity because high-quality advocacy advances an organization’s mission while achieving impact on a scale not possible through direct service or programs alone. (Perhaps you’ve guessed the answer to our question, above — by adopting a systemic approach to changing policy, Nonprofit B can achieve far greater impact and serve far more individuals than Nonprofit A can by only serving individuals on a case by case basis.)

The separatist approach is also evident in most of the trainings for advocacy and policy. These tend to be narrowly focused on individual skills building – learning the legal rules of advocacy or how to talk to policymakers. Yet research suggests that when individuals are trained about policy and advocacy in isolation from their organization and its context, the organization’s overall effectiveness suffers. In turn, advocacy is further marginalized and organizations remain simply reactive to the policy landscape, rather than proactive.

The truth is, advocacy that is connected to the mission is the single most effective strategy a nonprofit can employ to have impact, because it has the potential to enhance all the things an organization does. By taking a public position on an issue, a nonprofit increases its likelihood of attracting funders, volunteers and garnering more public support for its work. It’s also an opportunity to demonstrate leadership to external audiences including policymakers and constituents.

Successful advocacy requires that an organization recognize that there are certain internal conditions that must be in place to support advocacy. And these conditions need to align with the multiple dimensions or facets of advocacy: the external dimension focuses on the broader policy environment; the internal dimension highlights the organizational, programmatic and individual-level components of policy work; and in between, there are linkages and alignments that must be made among the program, stakeholders, and the internal supporting functions of an organization like communications, finance, technology and fundraising.

What does an advocacy-forward organization look like?
Organizations with a strategic focus on advocacy routinely plan for and prioritize advocacy; it is built it into thee character and culture of their organization. How do they accomplish this?

1. A commitment to advocacy is firmly in place at the leadership level. This includes ensuring the board understands the value of advocacy and how it can advance the organization’s mission.

2. The mission, vision and values of the organization include advocacy as an intrinsic component. Research has shown that the most successful advocacy organizations are ones that have integrated it by sharing leadership, recruiting board members with advocacy knowledge, building a culture of support for advocacy

3. A plan and mechanisms for engaging stakeholders exists including communications devices such as newsletters and social media outlets, technology and databases for tracking and managing relationships with constituents, as well as resources and ready made materials for constituents to take action on specific bills.

In short, similar to any other strategy for achieving effectiveness, advocacy must be planned for in advance to ensure the organizational dots are connected and aligned to achieve maximum impact and the internal conditions for advocacy to take root, grow and be nurtured are in place. Only in this way will advocacy begin to be seen as part of the nonprofit business model.

12/11/2016 11:00 AM |
Anonymous

By: Carey Freimuth, Caritas Financial

In our last post, we discussed the importance of nonprofit Boards creating and maintaining an Investment Policy Statement (IPS). This article discusses the role of an IPS in the relationship between boards and their financial advisors.

A recent survey found that among private foundations with $1 to $10 million in assets, 30% did not have an IPS and additionally, 35% were not working with an advisor.[1] These lapses can lead to a breach in fulfilling one’s fiduciary responsibility.

What is the role of the board vs. financial advisors?

The Board: it is up to the board to actively oversee an organization’s financial performance. According to the Prudent Investor Laws, the board or organization needs to adopt investment policies, thoroughly vet its financial advisors, and regularly review performance to fully fulfill their fiduciary responsibilities. While this sounds daunting and time consuming, board members can delegate some of those responsibilities to an advisor. This increases the investment oversight, especially if the board members lack sufficient time to dedicate to this responsibility. This protects both the organization and the board members: if followed, the individual members of the board and the organization are less likely to be liable for the actions of investment underperformance. While it seems straightforward, many boards are lax in updating or reviewing the IPS (or even creating one!), reviewing performance, and monitoring their advisors.

Financial Advisors: Advisors can help provide board members with confidence they are doing good while acting responsibility. The board can delegate investment decision making to an advisor to help with faster decision-making, implementing a more goals focused strategy to improve risk management, and better track progress against goals. Moreover, many officers and trustees welcome additional education on the standards of care that they must follow as fiduciaries of the organization.

Like many people in their role, board members can be uncomfortable with all of the responsibilities and processes that need to be addressed in order to protect the organization and their position within the organization as a fiduciaries. An IPS lays the foundation for an organization’s overall governance structure to ensure that fiduciaries are fulfilling their obligations. A good IPS should clearly define the relationship between the advisor and client right from the start. These expectations give advisors a better sense of what the clients expect in terms of volatility and returns, while helping to educate clients on realistic outcomes and the importance of staying the course in challenging markets.

In sum, this division of labor that allows boards to supervise third-party advisors and the advisors to do the work of actively investing an organization’s assets creates a solid check and balance. And once your organization has an IPS in place that is reviewed regularly, you can feel more confident you are fulfilling your fiduciary responsibilities.

12/11/2016 10:57 AM |
Anonymous

By: Carey Freimuth, Caritas Financial
A primary responsibility of board members is to serve as trustees of the organization’s assets by exercising due diligence to ensure that its financial situation remains sound. But while fiduciaries need to protect an organization’s assets, they also need to ensure that aversion to risk doesn’t compromise the mission of the organization over the long term.

The old adage ‘cash is king’ doesn’t always apply in the world of investments. While many fiduciaries believe they are being prudent by conservatively investing all the organization’s assets in cash, this can actually lose them money in real dollar value. Simply put, the compounding effect of inflation over time results in erosion of the organization’s purchasing power.

What is an IPS?
The board needs to weigh the options and establish guidelines and policies that minimize their exposure to identified portfolio risks such as a lack of diversification or a level of volatility that is mismatched with the IPS’s stated goals and time horizon. This is where the Investment Policy Statement (IPS) comes into play as an important document by which investment decisions are based. In its most basic form, an IPS is a document which sets forth in writing how an institution’s money is to be managed by presenting financial objectives in the context of how much risk the fiduciaries are willing and able to bear. While an IPS should be customized to meet the needs and mission of the organization, the document should include:

Asset allocation: What types of investments will meet the organization’s goals and risk tolerance?

Time horizon: When will the funds be needed or will they be held into perpetuity?

Rebalancing and spending policy: To what degree does the organization depend on the funds to support their operating budget?

Moral or ideological convictions of the organization: Are there any restrictions on holdings based on these beliefs or is socially responsible investing a priority?

Responsibilities and roles: What is each party’s involvement in the investment decision making process and is this clearly defined?

Why have one at all?

An IPS is essential to an organization’s strategic and financial growth. They offer three major benefits:

Provide financial discipline in tough times. An IPS instills discipline in times of market volatility by clearly defining the goals and objectives of the portfolio while outlining a specific plan and strategy to manage the funds in order to reach those goals. It can also be used as a tool to manage and minimize any risks identified throughout the process.

Maintain strategic intent. A sound, thoughtful IPS is crucial to advancing the strategic intent of the organization while helping fiduciaries mitigate potential risks to the assets. It helps everyone focus on the mission of the organization and provides continuity in decision making.

Reassure donors. By maintaining discipline during tough times and staying true to your organizational mission, you can demonstrate to potential donors your commitment to managing the assets with care, skill and prudence. When a donor contributes money, they do so with the expectation that the board will invest wisely and use that money to further the mission of the organization.

The best way to give donors confidence in this is through the creation and regular review of an IPS[1].

[1] While the document is not meant to be changed frequently, it should be periodically reviewed to ensure all language is up-to-date reflecting current fiduciary standards and long-term objectives. For example, the Uniform Prudent Management of Institutional Funds Act (UPMIFA) of 2006 replaces the Uniform Management of Institutional Funds Act (UMIFA) of 1972. It is important to review an IPS to ensure it fully captures the updates of such legislation.

12/11/2016 10:55 AM |
Anonymous

By: James Reeves, Do Well Do Good, LLC.
This guest post, from James Reeves of Do Well, Do Good LLC, highlights some of the great discussion from ACN’s February 25th program. A special thanks to James and our other participants!

This morning I had the honor of speaking on a panel for the Association of Consultants to Nonprofits, along with Bill Bonner of Bonner of IMPR and Leah Bradford of the Kraft Foods Group and the Kraft Foods Group Foundation. In addition to being really impressed by ACN as an organization, I really enjoyed the lively and engaged crowd that had thought provoking questions and great contributions.

My task was to answer two questions:

How are companies using consultants to develop corporate partnerships related to Corporate Social Responsibility (CSR) or sustainability?

Does this market have potential?

CSR Defined
First, I think it’s important to start nearly every conversation about CSR by defining it. The simplest definition I give is that CSR is managing and organization’s business operations in a way that is good for people, profit, and the planet. CSR deals with a wide range of issues: supply chain & human rights protection, lobbying, workers’ pay and benefits, product life cycles, investments, public disclosure practices, diversity and inclusion, and carbon emissions to name just a few issues.

A very key point is that CSR includes philanthropy, volunteering, and community relations, but as I pointed out, CSR is much more than that. Don’t conflate the two terms.

For the purpose of this article and this morning I treated the terms CSR and sustainability as being synonymous.

A Nonprofit’s Role
For the most part, nonprofit organizations tend not to engage with companies – specifically in helping them with CSR. For the most part, most nonprofits are geared to work with companies in the community relations or cause-marketing spheres. However, occasionally a nonprofit can help companies fulfill their goals related to the social or environmental impacts of their business.

A great example is Aspire, a Chicagoland nonprofit that helps differently abled adults attain meaningful jobs (as well as many other services). The nonprofit partnered with OfficeMax and the Kessler Foundation to develop a training program to help Aspire’s constituents thrive in a retail or warehouse work environment. (Full disclosure: years ago, I worked and consulted for OfficeMax, but I had no involvement in this program). This program helped OfficeMax with its diversity and inclusion efforts while also servicing Aspire’s constituents.

The Difference: A CSR or Philanthropic Role
So how is this not just a company sponsoring a nonprofit? The key distinction for me between a philanthropic program versus a nonprofit helping a company with CSR is as follows…

For cause-marketing or community relations programs (philanthropy/volunteering) a nonprofit’s role is primarily focused on using its assets to help a company. This could be the non-profit’s brand or logo to be put on a product’s packaging to increase sales and support a cause. Or a nonprofit using its Board of Directors to help a company’s executives create relationships in the community and build their leadership capabilities.

A nonprofit is helping a company with CSR when it is primarily focused on using its expertise to help a company. In this case, Aspire has a unique and differentiating skill set that few organizations have: insights into the employment of adults who have a different set of abilities.

Tough Love: A Role for Consultants? Not really.
While I have helped some of my clients with their relationships with nonprofits, I do not see it as a major market for consultants to dive into. So my tough love advice is: will it put food on your table? Maybe. But if so, it’ll likely just be a side dish.
The central question for any business and especially consulting is whether you offer products or services that solve a problem so that people are willing to pay money for it. Companies rarely need help from consultants for match-making services, as an example. There may be some services where consultants are needed for facilitating group meetings with nonprofit organization, but in my experience this hasn’t been a huge market. (I do think, however, that there is a much bigger role for consultants to play in helping non-profits with their cause-marketing, volunteering, and philanthropic capacity.)

However, things aren’t so bleak. The projects I have worked on for my for-profit clients include facilitating such meetings and benchmarking existing and not-existing relationships against future needs related to CSR strategies. Yet, this wasn’t something I specifically “sold” as a service to my clients. Rather, I received these projects because I was already a trusted adviser, known for excellent research, writing, analytical, and facilitation skills. So while those were the services I provided, they just happened to be on the subject matter of relationships with non-profits or Non-Governmental Organizations (NGOs) related to specifically to CSR programs.

Sponsorships between nonprofits and companies dealing with CSR are so closely ingrained with a nonprofit’s core abilities that bringing in consultants would be redundant. In fact, one could argue that it would be a warning sign that a nonprofit may not be as strong of a partner if they have to bring in non-ancillary help.

So my honest advice to consultants is to focus on your core competencies rather than trying to become the central hub of nonprofit and for-profit relationships. If such projects arrive, treat them as welcome appetizers rather than regular entrees.